Was a list owner's transfer of magnetic tape to a mailing company a lease when the company copied the tape and returned it?

Plain-English summary

The October 19, 1976 letter followed a September 29 meeting about an absent June 8 decision/recommendation on a redetermination petition. It considered changed facts/arguments from a memo dated only September-, 1975; no day or underlying document appears.

For magnetic lists, company received owner's tape, made two copies and returned original. Under former Regulation 1504(a)(4) and an incompletely identified Board Capitol Records decision, transfer was not merely intangible information. Copying exercised dominion/control within an incompletely cited Culligan case, making a taxable lease.

Regulation 1502(d)(5) did not apply because company processed nothing for list owner and returned no output in human-readable or other form.

For hard copy, warranty-registration cards/coupons counted as mailing lists intended for circulating material by mail, regardless of original collection purpose or exact final-mailing format. This paragraph prints Regulation 1504(4)(1), not the earlier (a)(4); no source resolves the difference.

One time only appeared in company/customer contract, not between company and list owner. Even an owner agreement restricting company's customer did not restrict company's own use. Owner approval of each mailing protected against potential competitors; it was not a numeric limit.

Counsel corrected his earlier implication that agent opposed independent contractor. Under verified Automatic Canteen, proper distinction was employee versus independent contractor. If company was an agent, it was an independent-contractor/agent acting for—but not by—owner, and clearly not employee.

No adjustment was made to prior recommendation. Petitioner had ten days from letter to request Board hearing in writing; without request, recommendation would go to Board for consideration/action. No request or action appears.

Live Annotation 330.3011 publishes magnetic-tape copying/control, no owner-output, Regulation 1502 inapplicability and one-time restriction. It omits hard-copy branch, procedural history/date uncertainty, missing changed facts, two incomplete authorities, inconsistent Regulation 1504 form, contractor/employee correction, no-adjustment result and hearing deadline/outcome.

No decision/recommendation, meeting record, changed-facts memo, petition, tape/list/copy, hard copy/cards/coupons, list-owner/customer agreement, mailing approval, service/output, agency/employment record, hearing request, Board action, assessment, claim, appeal or later outcome appears.

What this means for you

Preserve physical media and copy workflow, who requests/receives output, every owner/customer use restriction and approval, hard-copy source/purpose and worker relationship. A customer-only one-time limit did not restrict the intermediary's own dominion here.

Common questions

Did returning original prevent lease treatment?

No. Making copies before return was sufficient dominion and control under the source's analysis.

Was this processing for list owner?

No. The company did not return processed output to the list owner in human-readable or other form.

Did one-time customer restriction limit company?

No. That restriction ran between the company and its customer, not between the company and the list owner.

Were cards and coupons also addressed?

Yes. Counsel treated them as hard-copy mailing lists under the printed regulation form.

Was company list owner's employee?

No. The letter classified it as an independent contractor, even if it could also be described as an agent.

Are Capitol Records and Culligan fully cited?

No. The letter names them without complete citations or decisions.

Did petitioner request hearing within ten days?

No request or Board outcome appears.

Citations and references

• Former Regulation 1504(a)(4) and printed 1504(4)(1) — tape/hard-copy lists; form unresolved
• Former Regulation 1502(d)(5) — owner-processing rule inapplicable
• Capitol Records decision/Culligan case — incomplete named authorities
• Automatic Canteen, 238 Cal.App.2d 372, 385 — verified relationship authority
• Prior recommendation/meeting/memo and all media/contract/relationship/hearing/outcome records — absent
• Live Annotation 330.3011 — tape and one-time branches only

Source

• Annotated Legal Opinions collection: CDTFA Annotated Legal Opinions
• Annotation page: Annotation 330.3011
• Original supporting opinion: 330.3011 PDF
• Citation check: Automatic Canteen

Original ruling text

330.3011

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION

(916) 445-6450

October 19, 1976
Dear

This is to inform you of the conclusions we have reached following our meeting on September 29, 1976 to further discuss my Decision and Recommendation of June 8, 1976 on --- petition for redetermination. Our conclusions take into account the changes of fact and argumentation which you submitted in your memo on September-, 1975. As to those situations in which the names and addresses are transferred to --- by means of a magnetic tape, we remain of the opinion that this constitutes a lease of the, tape to --We do not agree that Regulation 1504(a) (4) applies only to situations in which the transferred tape is directly used to produce the mailing list in its final form. The regulation must be construed consistently with the Board's Capitol Records decision which is, in effect, an interpretation applying to all transfers of tapes. The Board simply does not agree that the transfer of a tape involves only a transfer of intangible information Two copies of the list owner's tape are made by --- and than the original tape is returned to the owner. This use of the original tape to make copies is an exercise of dominion and control over the tape by --- and is well within the court's opinion in, the Culligan case. We do not see Regulation 1502(d) (5) as having any relevance to the questions before us. --- is not processing information for the list owner. No output resulting from the processing is transferred to the list owner in human readable form, or in any other form. As to the names and addresses transferred to --- by warranty registration cards or coupons (hard copy), we cannot escape the conclusion that the Board in enacting Regulation 1504(4) (1) intended to include such situations by stating that a mailing list may be in the form of “…index cards, or other similar means of communication”. As between --- and the list owner, such hard copy is obviously "intended for use in circulating material by mail”, regardless of what the list owner's original intention was in gathering the hard copy. To restrict “mailing list” to hard copy in the precise form necessary for final mailing purposes would be to completely emasculate Regulation 1504, given the demographic and postal service requirements for such mailings.

As to both tapes and hard copy, we do not see the “one time only” restriction as applicable here. This restriction is contained only in the contract between --- and its customer, not between --- and the list owner. The fact that --- agrees with the list owner to restrict --- customer to a one time use only does not restrict --- to a one time use. The fact that --- must get the list owner s approval of each mailing is not a numerical restriction but goes to the list owner not wanting to undercut his own purposes by allowing mailings by potential competitors. Lastly, as I stated at our meeting, the implied distinction drawn in my Decision and Recommendation between “agents” and “independent contractors” is misleading. The correct distinction is between “employees” and “independent contractors” as stated in Automatic Canteen Co. v. State Board of Equalization, 238 Cal. App. 2d 372, 385. if with in each such distinctions --- was in any sense an agent, it was an independent contractor/agent, with its action being for, but not by, the list owner. --- was clearly not an “employee” of the list owner. Given the above, we regret that we find no basis for adjusting our Decision and Recommendation. If --- desires a Board hearing in this matter, please request such hearing in writing to --- of this office within 10 days of the date of this letter. If --- does not receive such request within 10 days, our Decision and Recommendation will be presented to the Board for its consideration and action.

Very truly yours,

Donald J. Hennessy
Tax Counsel

DJH:rt